- Changes to the personal allowance system, announced in the last Labour Budget, will lead to an extra charge for some taxpayers from April 2027.
- The new rules will primarily affect individuals with additional income from investments, property, or savings, pushing more of this income into higher tax bands.
- Currently, HMRC allows taxpayers to allocate their personal allowance in the most tax-efficient way, often against savings or dividend income.
- From 2027, the personal allowance must first be allocated against employment, trading, or pension income, potentially increasing tax bills by up to £182 or more for those affected.
- Experts warn this change could disincentivise saving and lead to rent increases, while the Treasury states it aims to tax income from assets more fairly.
IN FULL
Some taxpayers may face £180 hit after personal allowance shake-up
